Young, Old Have Vastly Different Expectations for Short-Run Finances

Gallup's polling on personal finances* shows that Americans generally expect specific aspects of their personal financial situations -- including their income, spending, savings and debt -- to remain stable in the short term. Among those who expect change, optimists outnumber pessimists by a wide margin. A closer look at the data shows that financial expectations vary widely by age, with most younger Americans expecting their situations to change for the better in the short run, while older Americans expect things to stay the same.

Each month, Gallup asks Americans whether they expect their income, savings, spending, and debt to increase, decrease, or remain the same in the next six months. The data underscore the idea that most Americans' finances remain pretty steady in the short term.

This stability is evident in two ways. First, there is little variation from month to month in Gallup's estimates of Americans' predictions for their short-term income, spending, savings, and debt. For example, Gallup typically finds about a quarter of Americans expecting their spending to increase in the next six months, about a quarter expecting it to decrease, and about half expecting it to stay the same.

Second, the most common response across three of the four categories (income, savings, and spending) is that things will "stay the same" in the next six months. The one exception is that slightly more Americans predict their debt load will decrease (42%) than say it will stay the same (38%).

Americans' Expectations for Their Personal Financial Situations, January-May 2005

However, not all Americans are alike in expecting little change in their personal financial situations. Younger Americans are more likely than older Americans to expect changes in their spending, saving, income, and debt over the next six months. Most young adults, aged 18 to 29, believe their incomes and savings will increase, and 4 in 10 expect their spending to go up.

In general, expectations for personal financial situations grow more stable by age group -- 18- to 29-year-olds expect the most change in all four aspects, 30- to 49-year-olds expect less change than 18- to 29-year-olds but more than those in older age groups, and so on. A majority of those age 65 and older expect all four financial aspects to remain the same, with income expectations the most stable -- 70% expect their incomes to remain the same in the next six months.

Personal Finance Expectations by Age, 2005

In all groups, the percentage who expect their savings to increase is about the same as the percentage who expect their incomes to increase. For example, 55% of those in the 18- to 29-year-old age group expect their income to increase, and 56% expect their savings to increase. Older Americans are slightly more likely to expect their savings to increase (23%) than their income to increase (16%), but expectations for increased savings are not far below expectations for increased income in any group.

In all age groups except those 65 and older, a smaller percentage expects spending to increase than expects income to increase. Among the oldest age group, 18% expect their spending to increase while 16% expect their income to increase.

So among most Americans, expectations of higher incomes are associated with expectations of increased savings, but not necessarily increased spending.

Bottom Line

These results likely reflect the general pattern of Americans' financial situations, with younger Americans expecting their incomes to increase as they get established in their jobs, allowing them to increase their savings and spending. Whether that improvement actually occurs in the six-month window or just reflects the optimism of youth is another matter that these data cannot answer. As people age, their financial situations likely stabilize, as do their expectations regarding their finances in the near future. And when Americans reach retirement age -- and often live on fixed incomes from Social Security benefits and work pensions -- they expect their financial situations to change little in the short term.

*These results are based on combined data from 5,032 telephone interviews with randomly selected national samples of U.S. adults, age 18 and older, conducted January-May 2005. For results based on this sample, one can say with 95% confidence that the maximum margin of error associated with sampling is ±1 percentage point.

For results based on the sample of 587 18- to 29-year-olds, the maximum margin of sampling error is ±4 percentage points.

For results based on the sample of 1,876 30- to 49-year-olds, the maximum margin of sampling error is ±3 percentage points.

For results based on the sample of 1,421 50- to 64-year-olds, the maximum margin of sampling error is ±3 percentage points.

For results based on the sample of 1,094 Americans 65 and older, the maximum margin of sampling error is ±3 percentage points.